House flipping for a living is a lot harder than it was a decade ago. Even though buyers are eager to snap up them up like hot cakes, their home inspectors are ready to identify every single imperfection that you’ve left behind. Today, home renovations, renewals and flipping are a big boost to the local economy. Dumpsters, panel trucks, workers buzzing around a house like a hive of bees- all signs that something magical is about to happen in the neighborhood. Just like an artist carefully strokes oil on a canvas, the renovator up the street is creating something beautiful – there’s a home that’s about to go from drab to fab.
Now, anyone who has done a few renewals or flips will tell you, it’s not quite as easy as the shows on HGTV or Flip this House would lead you to believe. Not everyone gets to dance around the “Sold” sign celebrating a huge profit hours after the house hits the market. A talented renovator makes it look easy. Like other forms of art, a pro makes it look easy because they know what they’re doing. It’s a different story for the novice renovator. Avoiding some key traps can go a long way in ensuring success.
House flipping mistake #1 : Overbidding
Not every Power of Sale or Estate Sale is a good deal for a flip or renewal. Check the MLS® history of the listing. Has it ever been on the market before? Why didn’t it sell then? Mold? Grow op? Seasonal moisture issues? Hidden knob and tube wiring? Dry rot? You wouldn’t be the first person to see profits disappear by adrenaline fueled overbidding.
House flipping mistake # 2: Ignoring price ceilings
Location, Location…Location. It holds true with flips and renewals. Every location has a ceiling in prices. It’s easy to think that you may be able to push it to a new high with a wonderful product, but it’s a huge risk. Check with a local REALTOR® who knows the area to find out what the price ceiling is. The thrill of selling fast can be countered by the agony of a mutual release if the appraiser can’t support the value.
House flipping mistake # 3: “It’s not that big of a deal”
Be shrewd. Roof, hydro, plumbing, kitchen,furnace,bathroom, flooring & parking-all important elements that if not considered, can cost you your profit. No drives or mutual drives may be common fodder in one price range, but quite a deficiency in another. Know what you’re creating and who you’re going to be selling it to.
House flipping mistake # 4: Too much or too little
Divide your local market into 3 parts; low, middle and upper. If the house is in the low market, don’t chew up your profits with high quality hardwood floors and granite counter tops. In the upper market, don’t loose your profits by putting in laminate flooring and lower end light fixtures. Know your market and get it just right.
House flipping mistake # 5: Bad Math
Overestimating the work that you’re going to have to do will hinder you in the bidding process – underestimating will result in paying too much. Be informed and have trusted trades on call. Sharpen your pencil and do your math. If you start writing in red, double check to make sure you’re not being over cautious. If you can’t see a profit at the end of the day- don’t be afraid to move onto the next property.